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Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Eli Lilly (LLY - Free Report) , which currently has a Momentum Style Score of B. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Eli Lilly currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

Let's discuss some of the components of the Momentum Style Score for LLY that show why this drugmaker shows promise as a solid momentum pick.

A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For LLY, shares are up 5.11% over the past week while the Zacks Large Cap Pharmaceuticals industry is up 3.85% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 10.03% compares favorably with the industry's 3.59% performance as well.

Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Shares of Eli Lilly have increased 10.3% over the past quarter, and have gained 35.39% in the last year. In comparison, the S&P 500 has only moved -6.21% and 4.36%, respectively.

Investors should also take note of LLY's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, LLY is averaging 4,456,462 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with LLY.

Over the past two months, 7 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost LLY's consensus estimate, increasing from $5.47 to $5.58 in the past 60 days. Looking at the next fiscal year, 5 estimates have moved upwards while there have been 1 downward revision in the same time period.

Bottom Line

Given these factors, it shouldn't be surprising that LLY is a #2 (Buy) stock and boasts a Momentum Score of B. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Eli Lilly on your short list.

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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25.28% per year. These returns cover a period from January 1, 1988 through February 4, 2019. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

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